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SYNOPSIS THE GOVERNING LEGISLATION The Nature of an Indian Trust Requirements of a Trust Trust deed Complete constitution of a trust Legislation relating to trusts Trustees Trustees’ Duties REGULATORY ENVIRONMENT AND LIMITATION ON TRUSTS Courts Breach of Trust Limitation on trusts Perpetuities and accumulations Remuneration Exoneration clauses Public policy Who can act as a trustee? REASONS FOR THE CREATION OF TRUSTS AND THEIR USES Personal or Private Trusts Pension and employee benefits Collective investment schemes Charities Non-Charitable Purpose Trusts CONCLUSION PRECEDENTS • • • • • • Agenda of meeting of Board of Trustees Appointment of additional members to Board of Trustees Deed of Family Trust Settlement Rules and Regulations Governing the Management of “Nature For Children” Trust Deed Alteration of A Trust Deed
The Governing Legislation The Nature of an Indian Trust The Indian Trusts Act, 1882 (hereinafter referred to as “the Act”) defines a trust as “an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner.”
The basic classification of trusts in India is between private and public trusts, the Act only being applicable to the former. The latter (public trusts and public charitable trusts) are governed by other legislation such as the Charitable & Religious Trusts Act, 1920; the Religious Endowments Act, 1863 and the Bombay Public Trusts Act, 1950. Since a study of charitable trusts is beyond the scope of this chapter, attention has been focused here on private trusts. The distinction between a private and public trust is that whereas in the former the beneficiaries are specific individuals, in the latter they are the general public or a class thereof. Thus, in the former the beneficiaries are persons who are ascertained or capable of being ascertained, in the latter they constitute a body, which is incapable of being ascertained. It is to be noted that the above definition does not set forth any distinction between an equitable and legal ownership. The person who reposes or declares the confidence is called the “author of the trust”; the person who accepts the confidence is called the “trustee”; the person for whose benefit the confidence is accepted is called the “beneficiary”; the subject matter of the trust is called “trust property” or “trust money”; the “beneficial interest” or “interest” of the beneficiary is his right against the trustee as owner of the trust property; and the instrument, if any, by which the trust is declared is called the “instrument of trust”. Requirements of a Trust Certainty In general, the creation of a trust necessitates: – certainty of words; – certainty of subject-matter; and – certainty of objects. Courts look at the intention conveyed through the words used in a trust rather than the form in which it is created. Indeed, no particular form is required for creation of the trust. If an intention to create a trust can be deduced without ambiguity, the court will give effect to that intention. The persons stated in the trust deed should be certain or capable of being rendered certain. The subject matter may not be considered uncertain by the courts only because it does not contain a quantified description. Under the Act, in order to create a valid trust, an author of the trust should indicate with reasonable certainty by any words or acts: (a) an intention on his part to create a trust; (b) the purpose of the trust; (c) the beneficiary; and (d) the trust property. Unless the trust is created by a will or the author of the trust himself is to be the trustee, he should transfer the trust property to the trustee.
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Trust deed Although the conventional way of creating a trust is by written document, there is no general requirement that it must only be created by deed or in writing. The interpretation of trust under the Act says that “.... and the instrument, if any, by which the trust is declared is called the instrument of trust.” However, where it concerns an immovable property, no trust in relation to such immovable property is valid unless declared by a non-testamentary instrument in writing, signed by the author of the trust or the trustees, and registered; or by the will of the author of the trust. A trust can be created orally, it can be imposed by statute and it can be imposed by a court as a result of the conduct of the parties (a constructive trust). However, wherever possible the use of a professionally drafted trust deed is recommended. A significant proportion of personal trusts still arise by Will. In this connection, it should also be said that under some circumstances the laws of intestacy impose a trust on the estates of those who die without a valid Will. These trusts can be for minor beneficiaries, usually children and the surviving spouse of the deceased. The requirements for, and conduct and administration of Will and intestacy trusts is the same as for inter vivos or lifetime settlements. Complete constitution of a trust Under the Act the creation of a trust is complete when the author indicates the intention, purpose, etc., as mentioned above, and transfers the trust property to the trustee, unless the trust is declared by a Will or the author himself is to be the trustee. A trust is created only if the settlor manifests clear intention to that effect. The manifestation of intention may be by written or spoken words or by conduct. No particular form of words or conduct is necessary. Although the creation of a trust includes the transferring of the trust property to the trustee, there is no requirement that in order to be valid; a trust must have a trustee. A trust will not fail for lack of a trustee and if no trustee is appointed or if the deed does not provide for further trustees, the statute or, ultimately, the court will provide for the appointment or appoint one. Where a composition deed is executed by the debtor who has earmarked some immovable properties for payment of debts, the names of debtors also being mentioned, such deed is a constructive trust and does not fail because no trustee is named.1
Legislation relating to trusts The principal statute relating to private trusts, which is the focus of this Chapter, is the Indian Trusts Act, 1882. This statute provides administrative powers for the trustees that are additional to the powers in the deed, but are subject to any restrictions if any in the deed. It should be stressed that most modern trust deeds do not rely on the statutory administrative powers available to trustees. The current approach, in professionally drafted deeds, is to confer on trustees such powers of administration wide or narrow as may be appropriate to the size and purpose of
1 Ebrahim Peer Mohamed v K. Gopal Bagree, AIR 1937 Cal 180. . .
the trust. This is especially true for investment powers, given the very limited list of permitted investments set out in the Act.1 Trustees In general, any individual, limited company or other corporation may act as a trustee. The Act provides that every person capable of holding property may be a trustee. It further provides that “where the trust involves the exercise of discretion, he cannot execute it unless he is competent to contract”. Therefore, the person should be mentally competent and of age. Curiously, a minor can become a trustee by circumstances - a constructive trustee - but cannot be expressly appointed as a trustee as under Indian law, a minor is not capable to be a trustee as he is not competent to contract. The Act does not forbid the beneficiary of a trust from being appointed as trustee. But, as a general rule, it is advisable to avoid appointing a beneficiary as a trustee as there may arise a conflict between his interest and his duty. It has been held by courts that the same person may be both a trustee and a beneficiary.2 There is no bar to a non-resident acting as a trustee although it is questionable if someone outside the country should act in this capacity, given the difficulty of enforcing the terms of the trust against a trustee who is out of the jurisdiction.3 This is only a permissive ground, not a mandatory disqualification, and requires an application to court. This is clarified by a statutory illustration, which provides that where a trustee goes to reside permanently out of India, the beneficiary may institute a suit to have such trustee removed and to appoint a new trustee in his place. Section 73 of the Act provides that where a person appointed as a trustee is absent from India for a continuous period of six months or leaves India for the purpose of residing abroad a new trustee may be appointed in his place. Unless the trust deed restricts the number, there is no restriction under law on the number of persons who may be appointed trustees. When the administration of the trust involves the receipt and custody of money, the minimum number of trustees should be two.4 A trustee will contract for all services to be provided for the trust in his personal capacity. Lenders to a trust, have no original right to claim payment of their debts out of the trust estate even though they may have made such payments against the requisition of the trustee. The remedy of creditors is against the trustee as an individual. The personal funds of the trustee are at risk and despite the trustee’s right to be reimbursed for all properly incurred debts on behalf of the trust, if the trust funds are insufficient the trustee will not be reimbursed. A decree will be passed against the trustee personally who has made the contract or borrowed the money. It may also be enforced against his beneficial interest in the estate.1 Trustees must therefore be very cautious in incurring financial
1 Section 20. . . 2 M.C. Mohapatra v R. Mohapatra, AIR 1951 Ori 132. . 3 This point is recognised by Explanation 1 to section 60 of the Act, which provides that . a person domiciled abroad is not a proper trustee. 4 Explanation I t s c i n 6 o t e A t . I o eto 0 f h c.
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obligations in the course of trust business and ensure that sufficient trust funds are available to meet its obligations. Trustees’ Duties Upon acceptance of the trust, the trustee remains under duty to the beneficiary to administer the trust. Simply stated, a trustee’s duty is to fulfil the purpose of the trust, and to obey the directions of the author of the trust given at the time of its creation, except as may be modified by the consent of all the beneficiaries being competent to contract. However in the performance of his duties, a trustee must have regard to certain additional duties, in particular: (a) to inform himself of the state of trust property; (b) to protect title to trust property; (c) not to set up title adverse to beneficiary; (d) to act with care; (b) to act impartially with respect to beneficiaries; (d) to prevent waste; (e) to keep and supply clear and accurate accounts of the trust property and other information and to inform the beneficiaries of the same; (f) to invest the trust funds and manage them prudently; and (g) to act jointly and unanimously with co-trustees, unless the governing deed permits otherwise. The duty of care has been examined particularly in connection with the standards to be applied to trust investment. A trustee has duty to take such care as an ordinary prudent person making investments for his own benefit. In the matter of investments the Indian Trusts Act is not as elaborate as the English Law contained in the Trustee Investment Act, 1961. Even though investment of trust property is the most critical factor among the duties of the trustees, Indian law contains no express provision to prevent ineffectual or motivated investments by self-seeking trustees. Courts in India are quick to provide redress to beneficiaries of a trust in the event of mismanagement. Lord Watson in Learoyd v. Whitely, (1887) 12 App Cas 727, spelled out the trustee’s duties as regards investment of trust properties: “ . . . Businessmen of prudence may, and frequently do, select investments which are more or less of a speculative character but it is the duty of a trustee to confine himself to the class of investments which are permitted by the trust and likewise to avoid all investments of that class which are attended with hazard . . .” The law now clearly recognises that a higher standard of care and diligence applies to paid trustees. The trustee is bound in a fiduciary character to protect the interests of another person and not to put himself in a position where his interest and duty conflict.2 In cases where the trustee enters into a transaction in regard to property whose interest he is to protect, onus lies on him to prove that
1 Mackintosh Burn Ltd. v Shivakali Kumar, AIR 1933 Cal 668. . . 2 Section 88, Indian Trusts Act, 1882. .
he did not gain any pecuniary advantage by such transaction.1 Sections 49, 51 and 52 of the Indian Trusts Act, 1882 enjoins the trustees to be faithful to the trust and execute it with reasonable diligence in the manner an ordinary prudent man of business would in the conduct of his own affairs. A person in a fiduciary position like a trustee is not entitled to make a profit for himself or a member of his family. It can also be said that he is not allowed to put himself in any such position in which a conflict may arise between his duty and his personal interest. The above sections cast a heavy responsibility in the matter of discharge of his duties as a trustee.2 When there are more than two or more beneficiaries in a trust, the trustee is under duty to deal impartially. The rule is applicable whether the beneficiaries are entitled to interest in the trust property simultaneously or successively. The trust instrument may sometime give discretion to favour one beneficiary over the other. The court will not control the exercise of such discretion, except to prevent the trustee from abusing it.2 When following the duty to invest it is important for the trustee to exercise an impartial judgement, free from prejudices or outside non-financial considerations. A trustee is bound to make the trust fund productive for the beneficiary by investing it in proper securities. It is not a duty of a trustee to give a beneficiary the information as to the way in which the beneficiary has to deal with his interest, for it is not the duty of a trustee to assist the beneficiary in squandering or anticipating his fortune. The trustee is under duty to the beneficiary to keep clear and accurate accounts with respect to the administration of the trust and to supply them on demand. The expenses incurred for supplying any information, which the beneficiary demands shall be paid by the beneficiary. The trustee also bears a duty to the beneficiary to allow the beneficiary or his agent to inspect or make copies of all title deeds and other documents relating to the trust estate which are in his own possession.3 The liability to render accounts is irrespective of any question of negligence or wilful default. The period for which the trustee is made liable to render accounts depends upon the facts and circumstances of each case.4 A beneficiary is entitled to inspect deeds and documents representing trust investment. He is also entitled to inspect most other documents relating to the trust as the beneficiaries are the equitable owners of the trust property, and therefore they are also the equitable owners of the documents which have arisen in the course of the trust administration. The beneficiary is entitled to see all trust documents, because they are the trust documents and because he is a beneficiary. They are, in this sense, his own.5 While a beneficiary is entitled to inspect trust documents, this rule would conflict with the rule that the trustees are
1 . 2 . 3 . 4 .
P e c L s i & C . L d v Miss Violet Ouchterlony Wapshare, AIR 1969 SC 843. ire ele o t. . M.V. Rama Subbiar v Manicka Narasimhachari, AIR 1979 SC 671. . C w n ( n r : , 1886 33 Ch D 179. oi i e) Sri Yadagiri Lakshmi Narasimha Swami Temple v Induru Pattabhirami Reddi, AIR 1967 SC . 71 8. . absie 5 O’Rourke v D r i h r , 1920 AC 581. .
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not obliged to give reasons for their decisions. The English Court of Appeal (which has persuasive value in India) has held, in effect, that the rule enabling a beneficiary to inspect trust documents did not extend to documents which gave reasons for the trustee’s decisions. If the document was one that the beneficiary was entitled to inspect, and if it also contains trustee’s reasons for decision, passages containing those reasons should be covered up when the document is produced to the beneficiary.1 A trustee is in a fiduciary relation to the beneficiary and therefore remains under a duty to perform his duties personally as a fiduciary with only limited statutory provision for delegation and the employment of agents. Delegation by a trustee is not illegal when such delegation becomes a matter of necessity for an efficient management of the trust. However, unless the original trust deed contains provisions permitting a trustee to delegate his duties to some of the trustees, those trustees cannot be asked to act according to the instructions of the delegating trustee.2 In the case of a private trust where there are more trustees than one, the concurrence of all is in general necessary in a transaction affecting the trust property and a majority cannot bind the trust estate. In order to bind the trust estate, the act must be the act of all. They constitute one body in the eyes of the law, and all must act together. This is subject to any express direction by the settlor.3 The existing statutory provisions permit the delegation of many administrative functions and the employment of agents to do them, but it is the delegation of discretion and decision-making that falls outside of these powers. An exception to this as provided in the Explanation to section 47 is the ability of a trustee to delegate his functions with respect to appointing an attorney or proxy to do an act merely ministerial and involving no independent discretion by power of attorney. The appointment of a proxy to do a job which is purely clerical or secretarial and which does not involve the task of taking an independent decision will not amount to delegation.4 A trust deed may provide that the trustee may not delegate for more than a specified period. Arrangements made by trustees among themselves for effective management of the trust are not treated as alienation of office or delegation of duties since such arrangements will remain with the persons who are jointly entitled to act as trustees.5 Regulatory environment and limitation on trusts Courts Although the courts are the ultimate control of the conduct and administration of trusts, they provide, in many respects, a light hand of control. There are no requirements for regular court approval of accounts or lodgement of documents
1 . 2 . 3 . 4 . 5 .
In re Marquess of Londonderry’s Settlement, 1964 Ch 594. Sree S M Jew v B K Vyas, AIR 1952 Cal 763. . Shanti Vijay and Co. v Princess Fatima Fouzia, (1979) 4 SCC 602. . Shanmuga Mudali v Arungiri Mudali, AIR 1932 Mad 658. . Nilamani Poricha v Appanna Poricha, AIR 1936 Mad 14. .
with the court nor any requirement for registration or validation of trust deeds with the court nor a public inspection of trust documents, with the notable exception: Under the Bombay Public Trusts Act, 1950 an act to regulate and to make provision for the administration of public, religious and charitable trusts in the State of Bombay (now Maharashtra). It includes provisions regarding the registration of public trusts, budget, accounts and audit of public trusts etc. Another exception is of trusts created by Wills. All Wills once admitted to probate after death are available for public inspection. Even this can be avoided by the use of secret trusts. The notification of the trust and its acceptance by the trustee precedes death and on death the Will merely leaves an unqualified legacy to the trustee, thus completing the constitution of the trust. The basis of the doctrine of secret trust is that the trust operates outside the Will, and the Indian Succession Act, 1925 is not concerned with a secret trust at all. The Indian courts have lesser power than the English courts to modify the trust or alter the directions of the author of the trust or authorise specific dealing with the trust property. Under the Act, the courts have been conferred the power to resolve disputes and to compel due administration. These powers of the court are wide and include, inter alia, the power to: (a) prescribe where the trust money should be invested;1 (b) extend the time within which a trustee is directed to sell property under the deed;2 (c) render opinion, advice or direction on any present questions regarding the management or administration of the trust property, on application by a trustee;3 (d) permit a trustee to lease trust property for a term exceeding 21 years from the date of executing the lease;4 (e) permit the trustee of a minor to apply the whole or any part of the trust property for or towards the minor’s maintenance, education, advancement or expenses when the income from the trust property is insufficient for the same;5 (f) control a discretionary power conferred on a trustee if the same is not exercised reasonably and in good faith by the trustee;6 (g) permit a trustee to buy or become mortgagee or lessee of the trust property or any part thereof for the advantage of the beneficiary;7 (h) execute a trust when there is no trustee, on the beneficiary’s application, until the appointment of a trustee or new trustee;8 (i) discharge a trustee from his office on the application of a trustee;1
1 . 2 . 3 . 4 . 5 . 6 . 7 . 8 . Section Section Section Section Section Section Section Section 20(f) of the Act. 22 of the Act. 34 of the Act. 36 of the Act. 41 of the Act. 49 of the Act. 53 of the Act. 59 of the Act.
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(j) (k) (l) (m)
appoint trustees, when no other way of appointment can be use;2 consider and award damages for breach of trust; determine the true construction of the terms of the trust; and remove a trustee on the application of beneficiaries of a trust or any other interested party.
Breach of Trust The court will be the arbiter of allegations that a trustee has breached trust, provided that there is no prior negotiated settlement. A breach of trust results from some improper act or omission relating to the administration of the trust or the interests of the beneficiaries arising under it. It involves some failures to carry out the general duties of the trustees as laid down by the Act. A trustee can breach trust in a myriad of ways (an exhaustive list is probably not possible) and in general the trust is entitled to be reconstituted financially as though the breach had not occurred. Examples of situations involving breach of trust by the trustee include paying trust property to the wrong person, purchasing trust property without authorisation, taking a profit from the trust property without authorisation, investing trust funds in unauthorised investments, failure to have trust funds transferred into his name, etc. In principle, a trustee is not liable for a breach of trust committed by his co-trustee but there may be a few circumstances in which he may be held liable where a breach of trust has been committed by his cotrustee for which he himself may be seen to be in some way at fault. The Act provides that in the absence of an express declaration to the contrary in the instrument of trust, a trustee will be liable for a breach of trust committed by his co-trustee in the following circumstances: (a) where he has delivered trust property to his co-trustee without seeing to its proper application; (b) where he allows his co-trustee to receive trust property and fails to make due enquiry as to the co-trustee’s dealings therewith, or allows him to retain it longer than the circumstances of the case reasonably requires; and (c) where he becomes aware of a breach of trust committed or intended by his co-trustee, and either actively conceals it or does not within a reasonable time take proper steps to protect the beneficiary’s interest. Where co-trustees jointly commit a breach of trust, or where a trustee by his neglect enables his co-trustee to commit a breach of trust, each is liable to the beneficiary for the whole of the loss occasioned by such breach. A trustee pursued successfully in this manner has a right of contribution against the other trustees. However the right of contribution is no authority for compelling contribution in the event of a fraud. Limitation on trusts
1 Section 72 of the Act. . 2 Section 74 of the Act. .
In the context of regulation of the operation of trusts, it is pertinent to look at the limitations on their operation imposed by law.
Perpetuities and accumulations The rule against perpetuity is a rule of common law. Broadly, a trust cannot exist for longer than a life in being (at the time of its creation) plus a further period of 21 years. A similar issue is the equally complex subject of the bar against excessive accumulation of income. In broad terms this can be considered to prevent income from being retained within the trust for a period greater than 21 years or for the life of the settlor. Thereafter it must be distributed. Under Indian law, a trust may be created for a lawful purpose. Every trust of which the purpose is unlawful is void. And where a trust is created for two purposes, of which one is lawful and the other unlawful, and the two purposes cannot be separated, the whole trust is void. Every future limitation, whether by way of executory devise, or trust of real or personal property, the vesting of which absolutely as to personality, or in fee as to realty, is postponed beyond the lives in being and 21 years afterwards (with a further period of gestation where it exists), is void. This rule does not apply to charitable trusts. Where the settlor gave benefit also to unborn children under a charitable trust deed which already had 12 beneficiaries and where he stipulated that the duration of the trust was 18 years from the date of the trust deed or his own death, whichever was later, the trust was held not to be invalid as it did not attract the rule of perpetuity.1 Where a Will provided for a trust for two minor children and any after-born children or their surviving issue, interests which were invalid under the rule against perpetuities were separable from valid interests and did not invalidate trust in its entirety.2 A trust which will not vest until a time beyond 21 years after the death of the last survivor of the testator living at the time of the testator’s death is illegal but that portion of the trust which can be performed within the proper period does not fail when it can be separated from the illegal provision. Remuneration The Act does not entitle a trustee to charge for his services. Reimbursement for expenses incurred is however allowed by section 32. A trustee must not profit from neither his office nor use or deal with the trust property for his own profit in any way and this includes remuneration. In the absence of express directions to the contrary contained in the instrument of trust or of a contract to the contrary entered into with the beneficiary or the court at the time of accepting the trust, a trustee has no right to remuneration for his trouble, skill and loss of time in executing the trust. However, an Official Trustee, Administrator General, Public Curator or a person
1 N. Chordiya Family Beneficial Trust v Income Tax Office, 1989 30 ITD 373 (Pune). . . 2 I r M c e e t ’ E t t , 24 Cal 1944 2d 904. . n e ihltis sae
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holding a certificate of administration is excepted from the application of the above principle. The general rule that a trustee must not profit from his office extends further than the mere charging of fees. Two main points should be noted. Firstly, this rule prevents self-dealing so that a trustee cannot purchase trust property on sale. Similarly a trustee for purchase of particular property for the beneficiary cannot buy it for himself. The permission of a principal civil court of original jurisdiction is necessary for a trustee to buy or become mortgagee or lessee of the trust property and such permission shall not be given unless the proposed purchase, mortgage or lease is manifestly for the advantage of the beneficiary. Secondly, it makes a trustee liable to account to the trust for any incidental profits. For example, trustees who were empowered to appoint two directors appointed themselves. They were held liable to account for remuneration received as directors, since their appointment had resulted from their use of trust powers.1 It is because of the difficulty with incidental profits that most trust companies” general terms and conditions of business (which are specifically authorised in their appointment in the trust deed) make provision for incidental remuneration for providing other services, such as acting as banker to the trust. It should be made clear that this does not affect the trustee’s right to be reimbursed for expenditure properly incurred on behalf of the trust, as this is not remuneration.
Exoneration clauses The Indian Trusts Act, 1882 enumerates certain duties and liabilities of the trustee. Thus, it is submitted that a trust, contrary to the provisions of the Act governing such duties and liabilities of the trustee would be severable from the trust deed. Therefore, the trustee is required by law to fulfil the duties enumerated. The Act lays down that a trustee is bound to: (a) fulfill the purpose of the trust; (b) be acquainted with the nature and circumstances of the trust property; and (c) protect the title to the trust property. The test of standard of care laid down is one of ordinary prudence, failing which, liability would lie on the trustee. Public policy As stated earlier, under Indian law a trust may be for any lawful purpose. The purpose of a trust is lawful unless forbidden by law, or is of such a nature that if permitted, would defeat the provisions of any law or is fraudulent or involves or implies injury to the person or property of another or the court regards it as opposed to public policy. The courts will hold a trust or a provision in the terms of a trust as invalid if the enforcement of the trust or its provisions would be against public policy, even though its performance does not involve the commission of a criminal or tortious act by the trustee. Examples of trusts found to have been against public policy include those that attempt or intend to:…
1 Re Gee 1948 Ch D 284, Re Orwell’s W.T.,  3 All ER 177. .
— be in restraint of marriage; — induce separation of husband and wife or parent and child; — publicise pornographic works, etc. It should also be noted that the if the settlor becomes bankrupt or liquidates his affairs within two years, or after two but within 10 years in some cases, the trust will be void or voidable as against the settlor’s creditors. Also, other settlements of property capable of being taken in execution will be void if executed with intent to defeat or delay the claims of creditors. Intent to defraud the creditors must however be proved against the settlor. Who can act as a trustee? For personal trusts usually there are three main types of trustees: corporate trustees, professional individuals (such as solicitors and accountants) and private individuals (usually friends or relatives of the settlor). There is a wide choice within the professionals as most major banks increasingly act as trustees. Similarly most solicitors and accountants are often called upon to so act. Naturally, professional trustees are only prepared to act where they will be remunerated and where the risk of a particular trusteeship is perceived to constitute an acceptable business risk. Reasons for the Creation of Trusts and their Uses The English doctrine of privity of contract limits third-party rights under contracts, thus making a trust an ideal vehicle for enforceable third-party rights. This section does not provide an exhaustive list of all possible uses of trusts, but instead it is intended to give an indication of the very considerable breadth of use and diversity of purpose. Personal or Private Trusts The purpose of trusteeship is not to protect the rights and interests of persons who for any reason are unable to effectively protect them for themselves. The law vests those rights and interests for safe custody, as it were, in some other person who is capable of guarding them and dealing with them, and who is placed under a legal obligation to use them for the benefit of him to whom they in truth belong. Therefore, the object behind the development of trusts was the preservation of wealth and to allow for the ability to direct the devolution of that wealth through future generations. Although this use of trusts has declined to some extent (principally because of taxation and the costs of trust administration) it still remains a key use. Taxation has curtailed some advantages and it has positively penalised the use of certain types of trusts that have been the instrument of tax evasion, but the social need for trusts remains. Although taxation is a disincentive in some areas, the ability of trusts to adapt to changes in tax legislation means that there are taxation advantages that can be exploited in other areas. The effect of this is an increasing trend for trusts to be drawn on the most flexible terms possible, in order to give scope to change and adapt benefits with future changes in taxation provisions.
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Trusts created with the intent to defraud creditors are void. Any gift can be set aside if it was made within two years of bankruptcy. Trusts can be used to meet a variety of family circumstances, such as to provide for those who are incapacitated to the degree that they lack the capacity to handle their own affairs or trust for the benefit of minor children or grandchildren for their education, marriages or general advancement in life. Usually such trusts are of a discretionary nature in order to permit the trustee flexibility in the application of income. Giving the beneficiary an absolute right can lead to complications if the income is greater than is needed. Trusts for the maintenance and education of children and more generally for the protection of minors” interests are created so that their prospective fortune is managed on their behalf by a trustee with clear fiduciary duties. Discretionary trusts enable the exact nature and amounts of the distributions among a family class to be postponed and assessed by the trustee in the light of circumstances when the distribution is due. Pension and employee benefits The application of trust law also provides the basis for the operation of many employee benefit schemes. A gratuity fund trust may be created for employees of a company. A trust may be constituted to establish a provident, superannuation, welfare or any other fund for the benefit of the employees. Collective investment schemes These are mutual funds, otherwise known as “unit trusts”, which enable investors (unit holders) to pool their capital for investment. The governing instrument for such vehicles is the trust deed, which defines the relationship between the investment managers of the fund, the trustee of the funds and the unit holders themselves. In broad terms, the major functions of the trustee are to hold the assets, maintain the register of unit holders, distribute income and ensure that the investment dealings of the manager remain within the terms of the trust. The trustee may also under some circumstances remove the manager. Such trusts are currently exempted from paying income tax to encourage capital market investment. Charities The Indian Trust Act, 1882 does not apply to public or private religious or charitable endowments. The distinction between private and public trusts is that in private trusts, the beneficiaries are defined and ascertained individuals but in a public trust interest may be vested in an uncertain and fluctuating body of persons.1 The conduct of public religious and charitable trusts in the State of .................... is subject to regulation by the Charity Commission appointed under the Bombay Public Trusts Act, 1950. The Charitable and Religious Trust Act, 1920 provides for more effectual control over the administration of charitable and religious trusts and enables the trustees of such trusts to obtain the directions of
1 Shanti Devi v S a e AIR 1982 Del 453. . . tt,
a court on certain matters, vide Section 7. Charitable trusts are exempt from the rule against perpetuities and have considerable taxation exemptions. However, in view of these considerable advantages there are controls as to what constitutes a charity. The Indian Trusts Act does not define the term charity. One has to import the legal meaning of the word charity from other related legislation. The definition can be found under the Income Tax Act 1961, wherein “charitable purpose” includes the relief of the poor, education, medical relief and the advancement of any other object of general public utility.1 In India, it has been held that relief of the poor by itself would not be a charitable object unless it involved an object of public utility. It is impossible to contend that relief of poverty, when that relief is restricted to members of one’s family, can be a charitable object, which is of general public utility.2 Non-Charitable Purpose Trusts The basic rule is that trusts created for abstract or impersonal purposes are void as there is no beneficiary to enforce the terms against the trustee, provided that the purpose is not charitable. Under provision 11 of the Bombay Public Trusts Act, 1920, a public trust created for certain purposes, some of which are charitable or religious and some are not, shall not be deemed to be void in respect to the charitable or religious purpose, only on the ground that it is void with respect to the non-charitable or non-religious purpose. Conclusion Trusts in India are being used increasingly as a form of business organisation as they offer a number of advantages, particularly to hold and control shareholding in companies. In one particular structuring exercise, this instrument was used very effectively to give the benefit of earnings in a vast industrial empire with crossborder interest to the family members without giving them the liberty to interfere with the professionally managed group companies and also to continue the benefit for the next generation. In certain circumstances trusts can still be effective tax planning tools. It is said about trusts that those who use them are unable to understand how they were ever able to live without them. PRECEDENTS AGENDA OF MEETING OF BOARD OF TRUSTEES Agenda for the Meeting of the Board of Trustees of .................... (name) Charitable Trust held on ...................., 20..... at .................... hours at .................... (address). Item No. Contents
1 Municipal Corporation of Delhi v Children Book Trust, (1992) 3 SCC 390. . . . 2 Trustees of Govardhandas Family Charitable Trust v Income Tax Commissioner, AIR 1952 . Bom 145.
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To appoint additional members to the Board of Trustees of the.................... TRUST, thereby raising the strength to....................
MINUTES Minutes of the Meeting of the Board of Trustees of .................... (name) Charitable Trust held on ...................., 20..... at .................... hours at .................... (address). Present: 1. .................... President 2. .................... Chairman 3. .................... Trustee 4. .................... Trustee 5. .................... Trustee 6. .................... Trustee In Attendance Shri .................... Shri .................... Shri .................... Shri .................... (for discussion only) Item No. .................... APPOINTMENT OF ADDITIONAL MEMBERS TO BOARD OF TRUSTEES .................... (name), President informed that it was necessary to appoint …………… persons as members of the Board of Trustees of .................... with provision for an alternate member for each. In this connection the following resolution was passed: “RESOLVED that the consent of the Board of Trustees be and is hereby given to the appointment of Mr./Mrs. ...................., representative of .................... as a member of the Board of trustees and Mr./Mrs. .................... as a member of the Board of Trustees.” .................... (name) CHARITABLE TRUST (address), .................... Dated:.................... To
(to all four Founder Trustees, to be sent) Shri.................... Dear Sir, Notice is hereby given that a meeting of the Board of Trustees which will be held at .................... (address), on ...................., 20..... at .................... hours to consider there at the matters as per the enclosed agenda. Yours faithfully, For .................... (name) CHARITABLE TRUST Hony. Secretary
DEED OF FAMILY TRUST SETTLEMENT Date of Execution: Date of Commencement: SETTLOR Ms. .................... (name) TRUSTEES 1. Ms. .................... (name) 2. Mr. .................... (name) 3. Ms. .................... (name) BENEFICIARY Master .................... (name) This INDENTURE made this .................... day of .................... 20..... BETWEEN Ms. .................... d/o.................... resident of .................... hereinafter referred to as the Settlor of the ONE PART AND Mr/Ms. .................... son/daughter of.................... resident of ...................., AND Mr/Ms. .................... son/daughter of .................... resident of ...................., hereinafter collectively referred to as trustees (which expression shall wherever the context so admits or requires be deemed to include the said trustees and the survivor/survivors of them and the heirs, executors and administrators of the survivor, their or his or her assigns and the trustees or trustee for the time being of these presents) of the OTHER PART. WHEREAS the Settlor is absolutely seized and possessed of and otherwise well and sufficiently entitled to an amount of Rupees .................... only; and WHEREAS the Settlor desires to provide a fund to be applied for the benefit of Beneficiary mentioned hereinafter and accordingly to create such trustees in the manner and subject to the powers, provisions, agreements and declarations declared and expressed hereinafter, and
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WHEREAS for the purpose of effectuating such desire, the Settlor has handed over a cheque No. .................... dated....................in favour of the trust drawn on .................... bank of an amount of Rupees.................... only, to the trustees intending that the said amount and future net income thereof shall be held by the Trustees upon the following Trust and subject to the powers, provisions, agreements and declarations hereinafter declared and expressed of and concerning the same which the trustees have agreed to do. NOW THIS INDENTURE WITNESSETH: 1. For effectuating the settlement, the Settlor hereby irrevocably transfers and assigns unto the trustees all the said amount of rupees .................... only and her beneficial interest in the said amount to have and to hold and stand possessed of the same, the trust fund and net income of the trust fund upon the trust and for the purpose hereinafter declared and expressed of and concerning the same. 2. The trust shall be known as .................... and shall carry on activities from .................... (address) and/or such other place or places as the trustees may agree upon from time to time. 3. In these presents, the following terms where the context admits, shall have the following meanings: (A) ‘the trust fund’ means and includes; (i) the sum of Rs. .................... settled by the settlor; and (ii) any other amounts, stocks, securities and other investments, business, properties and funds which may be substituted or added, the conversion thereof and/or accumulation, addition and accretion thereof by gift and/or otherwise, and/or the investments, or conversion of such accumulations, additions and accretion thereto. (B) ‘the Beneficiary’ means: .................... (name) (C) ‘the Trustees’ means the original trustees and the survivor of them and the heirs, executors and administrators of such survivor and their or his or her assigns and the trustees or trustee as may be appointed from time to time under these presents. (D) ‘the date of distribution’ means: (i) the day on which the beneficiary shall attain the age of thirty five years; or (ii) the day of death of the beneficiary; or (iii) such earlier day than either of the dates mentioned in (a) or (b) as the Trustees for the time being may, at any time, after the execution of these presents, fix as ‘the date of distribution’. (E) ‘the net income’ means the balance of interest, dividends, business profits, capital gains and other income of the trust fund after paying there out or providing for all the costs, charges and expenses incurred in or about the administration of the trust of these presents including any income-tax, wealth tax or other rates, assessments and duties and costs
of ordinary rebates to immovable property, if any, forming part of the trust fund. 4. On the consideration aforesaid the trustees hereby covenant with the settlor, his heirs, executors and administrators that the trustees and other trustees for the time being shall stand possessed of the trust fund to receive the annual or other net income arising therefrom upon the trusts and subject to the powers, provisions, agreements and declarations hereinafter declared and expressed of and concerning the same. 5. The trustees shall, till the date of distribution, hold and stand possessed of the trust fund upon the following trusts: (A) On the date of distribution, the trust shall cease and the trustees shall pay, transfer and handover the trust fund to the beneficiary: Provided that if the beneficiary shall die before the date of distribution, the trust fund which would have been taken by him had he not died shall be taken by his legal heir excluding the Settlor: [Provided, further, if there shall be no legal heir of such person, the trust fund shall be handed over to a public charitable trust as may be decided upon by the trustees.] (B) Pending the date of distribution, the trustees shall pay, transfer, distribute and/or hand over the net income of the trust fund to the Beneficiary at the end of each accounting year of the trust. Explanations: (i) For the purpose of sub-clause (B) above, the expression ‘accounting year’ shall mean: (a) in respect of the first such accounting year, the period beginning on the day hereof and ending on ....................; and (b) in respect of the subsequent accounting year the period beginning on the .................... every year and ending on the .................... every year. (ii) For the purpose of sub-clause (B) above, the net income of the trust fund shall be deemed to have accrued on the last day of each accounting year of the trust. 6. The trust established hereby shall be irrevocable. The trust fund and the net income thereof shall be possessed and enjoyed by the person beneficially entitled thereto by virtue of these presents to the entire exclusion of the Settlor and or any benefit to him by contract or otherwise and no part of the trust fund or the net income thereof shall be paid to or be paid for the benefit of the settlor in any circumstances whatsoever. 7. The trustees shall be free to sell or exchange or otherwise dispose of any assets, movable or immovable forming part of the trust fund and to invest all moneys which shall require investment in any manner they may think fit without being obliged to invest the same in the investments authorised by law or the investment of the trust fund and to sell or exchange such investments and other
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properties both movable and immovable as are forming part of the trust fund whenever they may think fit desirable to do so and. 8. Without prejudice to the generality of the foregoing powers, the trustees may invest any moneys requiring investment: (i) in the purchase of any immovable property situated in India or elsewhere and for the development thereof the trustees may borrow money at such interest as they may think fit for the purchase without security of the trust fund or any property forming part of the trust fund; (ii) in the purchase of or subscription to debentures, stocks, funds, shares and securities of any company or corporation whether incorporated in India or elsewhere; (iii) in making loans to or deposits with any person, firm or company or corporation; (iv) in making loans upon the security of any immovable property or movable property. (v) In any business, if permissible under the provisions of law, fiscal or otherwise which may be carried on by the trustees as such trustee for and on behalf of the trust hereby established or in partnership with any other person or persons; (vi) In the purchase of any immovable property or acquisition of flats by becoming member of co-operative societies; (vii) In such other investments of whatsoever nature and wheresoever whether involving liability or not or upon such personal credit with or without security as the trustees may think fit to the intent that the trustees shall have the same full and unrestricted power of investing and transposing the investments in all respects as if they were absolutely entitled hereto beneficially. 9. The Trustees may engage in carrying any activity for providing services or any business for and on account of the trust established by this deed and may invest any part of the trust fund in such activity, business or businesses and in course of such business, trustees may enter into contract for purchase or hire of equipment, sales or purchases, may borrow funds without security or on security of the trust fund at interest or free of interest as they may think fit, and engage and discharge executives, manager clerks and other staff and hire premises and open and operate banking account and take all legal and other proceedings and obtain and hold such licenses as may be necessary and apply for such registration under such laws relating to any activity, trade commerce or industry or sales or purchases or otherwise as they may think fit. The trustees may pay out of the trust fund and the income of the trust, such losses, damages, costs, charges, and expenses and as they may incur sustain or be liable for in such activity or business or otherwise as trustees may think fit. The trustees shall have all such power for the management and conduct of such activity or business as any individual proprietor has. The trustees may carry on any activity or business in partnership with any person, firm or company and may for that purpose execute
such deed or deeds containing such terms or provisions as the trustees may think fit and they may retire from or dissolve any such partnership and may invest any trust fund as capital or as loans or advance to any such partnership with interest or at such rate of interests as they may think fit and may execute any guarantee or indemnities or bonds in course of or for the purpose of the business of this trust and/or in connection or for the purpose of the business or other activity of any such partnership. The trustees may exercise all such power and they have as if they alone carried on such activity or business. The trustees may nominate any one of them to be a partner in such partnership for and on behalf of this trust though ostensibly such nominee may appear in such partnership as a partner in his/her individual name and the trustees shall out of the trust fund be found to indemnify such nominee against all losses, damages, expenses and all liabilities which such nominee may incur or sustain as partner in such partnership and such nominee shall have recourse to the trust fund for full indemnification. 10. The Trustees are hereby expressly authorised to accept gifts of moneys and/or property (movable or immovable) for the benefit of this trust from the Settlor and/or other person or persons and any such gifts shall be held by the trustees as accretion to or augmentation of the trust fund the money or other property received by way of such gift and future income thereof shall be held in like trusts in all respects as are herein contained and are applicable to the trust fund and the net income of the trust fund and shall be subject to the same trusts, powers and provisions as are contained in these presents and applicable thereto as if such money or property had formed part of the original trust funds. 11. (i) The powers of appointing new trustees shall vest with the trustees for the time being: (ii) All acts in carrying out these presents if done and carried out by a majority of the trustees for the time being shall be valid and effectual as if such acts had been done by all the trustees; (iii) Should any difference of opinion at any time exist between the trustees for the time being in relation to the commission or omission of any act or otherwise however, in the execution of this deed the opinion of the majority of such trustee shall prevail. (iv) Trustees may resign office as trustee by giving notice in writing to his/her co-trustees: (v) Without prejudice to the generality of their powers the trustee shall have powers: (a) to employee clerks and other employees, agents, brokers, bankers, lawyers, accountants and others and at such remuneration as they may think fit; (b) to delegate any powers to one or more of their body; (c) to appoint any one from amongst them as a managing trustee with such powers as may be delegated to him/her; (d) to delegate any powers as they can lawfully delegate to any person and to execute such power of attorney as they may think fit for the purpose
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(e) to withdraw any power or revoke any appointment of any employee or attorneys; (f) to let any portion of any immovable property forming part of the trust fund at such rent and for such period on such terms and conditions as they may think fit and to accept surrender of any lease; (g) to open and maintain banking accounts in the name of the trust or in the name of any business which the trustees may start or in the name of such one or more of the trustees as they may think fit and to make the account operable by such one or more of them as they may think fit; (h) to determine who shall be the first named as regards investments in shares, stocks, debentures and other securities and other investments; (i) to appoint proxy or proxies for voting at any meeting of creditors, contributors, shareholders or others; and (j) to allow any investments to stand in the name of any bank. 12. A resolution in writing circulated among all the trustees and signed by a majority of them present in India shall be as valid and effectual as if it has been duly passed at a meeting of the trustees duly called and convened. 13.(i) No trustee purporting to act in the execution of the trusts and powers of these present shall be liable for any loss unless it is attributable to his/her own dishonesty or to the wilful commission or omission by him/her of any act which commission or omission is known to his/her to constitute a breach of trust. (ii) A trustee or trustees of these present sign good faith paying over any moneys under the trust of these presents to his/her or their co-trustees or doing any act facilitating the receipt thereof for the purpose of the trusts of ….. shall not be answerable for the ……. or non-application thereof. IN WITNESS WHEREOF, this Deed is executed on the day and year first above written. By .................... (name) IN THE PRESENCE OF:
RULES AND REGULATIONS GOVERNING THE MANAGEMENT OF “NATURE FOR CHILDREN” 1. Board of Trustees 1.1 The NATURE FOR CHILDREN (hereinafter referred to as “NATURE FOR CHILDREN”) will be managed by a Board of Trustees having no more than six and not less than four members at any point of time. The DONOR shall be the President of the Board of Trustees. The Board will appoint a Chairman and an Hony. Secretary from amongst its members. The Hony. Secretary will summon the meetings of the Board on the instruction of the President as and when necessary. The quorum for the meeting of the Board of Trustees shall be four Trustees present and voting. All affairs relating to the Trust will be decided by a simple majority. In
the event of a tie, the President will have a casting vote. The DONOR Trustee will have a right of veto in all decisions. 1.2 The following will be deemed to be the Founder Trustees: 1. Shri “X” resident of.................... 2. Shrimati “X” w/o Shri “X”, 3. Shri “A” s/o Shri “X”, 4. Shri “B” s/o Shri “X” and their successors. 1.3 The Founder Trustees will have the power to name and appoint the remaining Trustees to the Board of Trustees. 1.4 The Founder Trustees will hold office until their death, resignation or incapacity. Any vacancy so caused will be filled by appointment made by a majority decision in a meeting of remaining Founder Trustees. The Founder Trustees shall have the right to nominate the direct lineal descendants and immediate family members in their place with the same powers. Upon nomination, such Trustees will also be called ‘Founder Trustees’. The Trustees other than the Founder Trustees shall hold office until their death, resignation or incapacity. The Founder Trustees will also have the power to remove any of the Trustees other than the Founder Trustees without assigning any reasons. Any vacancy so caused will be filled by appointment made by a majority decision in a meeting of the Founder Trustees. 2. Membership Membership of NATURE FOR CHILDREN shall be open to a person who is 18 years of age or above and who is interested in carrying out the aims and objectives of NATURE FOR CHILDREN and who has been accepted by the Board of Trustees. Each member shall pay the prescribed subscription and also accept to abide by the Rules and Regulations of NATURE FOR CHILDREN. 3. Subscription The Board of Trustees of the NATURE FOR CHILDREN will have the power to nominate members as Patrons, Life Members, Ordinary Members and Honorary Members and may fix such fees as deemed fit by them. 4. Disqualifications A member shall be liable to be disqualified in the following circumstances:… (a) (i) If his/her activities are contrary to the aims and objects of the NATURE FOR CHILDREN or against its interests; (ii) if he/she is convicted for any offence involving moral turpitude by a court of law; (iii) if he/she has become insolvent; (iv) if he/she does not pay arrears of subscription and the money due to the NATURE FOR CHILDREN within one month of issuance of notice for the said purpose, on him/her;
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(b) Any person sought to be disqualified as a member of the NATURE FOR CHILDREN, shall be given a show cause notice of two weeks as to why he/she should not be disqualified. (c) The show cause notice and reply, if any, received from the member shall be placed before the Board of Trustees of the NATURE FOR CHILDREN and the member shall stand disqualified, if his/her disqualification is approved by a majority decision. 5. The Managing Committee The Board of Trustees, may by majority from time to time, form a Managing Committee for the management of the Hospital, set up by the NATURE FOR CHILDREN, or for other activities that may be set up, which will hold office at the pleasure of the Board of Trustees and will report its activities to the Board of Trustees. The said Managing Committee or any of its members will hold office without any remuneration unless there is a contract to the contrary with any one of them and will retire on the 31st of March, every year but if otherwise eligible can offer themselves for re-appointment. The Managing Committee can be dissolved by the Board of Trustees by a simple resolution. The terms of any of the members of the Managing Committee can also be terminated in the same manner. The constitution and the meetings of the Managing Committee will be governed by such rules as may be framed by the Board of Trustees from time to time. 6. Powers of the Managing Committee The Managing Committee shall exercise all powers for carrying out the aims and objects of NATURE FOR CHILDREN, including NATURE FOR CHILDREN Child Care Centre, which have been delegated to the managing Committee for carrying out and more specifically the following: (a) for the purpose of running the hospital, the Managing Committee will have the authority, subject to the approval of the Board of Trustees to incur such expenses, enter into such contracts, buy and sell such assets, appoint or discharge such personnel and do all other deeds, acts and things as the Board of Trustees may in their absolute discretion may think it fit; (b) the Management and Administration of various activities of NATURE FOR CHILDREN, including that of NATURE FOR CHILDREN Child Care Centre; (c) the appointment of persons as employees with or without remuneration and to take such disciplinary action as may be necessary; (d) specifying the duties and powers of the employees; (e) the realisation of all subscription, dues or other moneys in any manner deemed expedient; (f) all acts and things, which are conducive to the efficient administration and fulfillment of the aims and objects of NATURE FOR CHILDREN and its activities. 7. The Trust Fund
7.1 The Trust fund shall be deposited by the Trustees at any reputed Bank, as the Founder Trustees may think proper and convenient, in the name of the Trust. The DONOR and any other Founder Trustees as may be named by the DONOR will have the power to operate the same, withdraw money from such account for the benefit of the Trust and to endorse, negotiate all instruments such as cheques, drafts, promissory notes for and on behalf of the Trust. All receipts of money for and on behalf of the Trust shall be deposited in such account and all withdrawals for and on behalf of the Trust shall be so debited to such accounts. This clause will not restrict the right to keep the Trust funds and assets in such security and other assets as the DONOR and such other Founder Trustees as named by the DONOR may from time to time determine. 7.2 Fees received from patrons and life members shall form part of the capital and reserve fund. The interest accruing therefrom may, however, be used towards the current expenses of NATURE FOR CHILDREN and its activities. 7.3 Funds received from ordinary members, donations from general public and interest that accrues from the investment of the capital and reserve fund shall form the general fund for the expenses of the NATURE FOR CHILDREN and its activities. Any balance from the general fund or any portion thereof might be transferred to the capital and reserve fund at the end of the year by a decision at the meeting of the Board of Trustees. 7.4 The Board of Trustees shall invest the money not required immediately for the Trust in accordance with the decision taken in that regard at a meeting of the Board of Trustees and keep accounts thereof. 7.5 The Board of Trustees shall maintain regular books of accounts of Trust moneys, receipts, out goings and other dealings. The Board of Trustees shall have the powers to take steps for the growth of the hospital or any other institute that may be set up and if necessary to erect or construct a hospital or any other such building on the land. 7.6 The Board of Trustees shall forward the Annual audited statement of accounts to ................. India and ................. (UK) [patron body, if any] within six months of the close of the financial year. The above mentioned, clause will be effective till such time as there is a valid memorandum of understanding between the ................. India, ................. (UK) and ................. 8. Miscellaneous 8.1 There will be no bar for appointment of any of the Trustees to serve the hospital on payment of salary or other compensation as long as the said Trustee is a qualified doctor or other professional. 8.2 The Founder Trustees shall have the power to make and alter the above rules and regulations with regard to the conduct of the Trust and all other matters in respect of which any power or duty is hereby vested in them as they may think proper for the enhancement of the object of the Trust and its better management. Such alteration or modification will not effect any acts, things or deeds already performed, including any act of the Trustees nor will it have the effect of revoking
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the Trust or of the donation. 8.3 In the event of any conflict between the above Rules and Regulations and the provisions of the Trust Deed, the Rules and Regulations as altered from time to time will take precedence over the provisions of the Trust Deed. TRUST DEED THIS DEED OF TRUST is made on this .................... day of...................., 20.... BETWEEN Mr. Alpha, s/o Mr. Alpha, aged .................... years, resident of.................... (address), of the FIRST PART, AND Mrs. Beta, w/o Mr. Beta, aged .................... years, resident of .................... (address), of the SECOND PART, AND Mr. Gama, s/o Mr. Gama, aged ...................., resident of .................... (address), of the THIRD PART. The Parties of the FIRST PART and of the SECOND PART shall hereinafter collectively be referred to as the “Settlors”. The Settlors and the part of the THIRD PART shall hereinafter collectively be referred to as the “Trustees” which expression shall, unless repugnant to the context or the meaning thereof, mean and include their survivor or survivors, and such other Trustees as may be appointed in the manner laid down hereinafter. The Trustees, both present and future, shall constitute the Board of Trustees of the Trust (hereinafter referred to as the “Board of Trustees”). WHEREAS the Trustees are desirous of carrying on certain public charitable activities. AND WHEREAS the Settlors for this purpose are desirous of settling upon a public charitable trust certain monies. AND WHEREAS the Trustees have agreed to become the Trustees of the charitable trust and carry out the obligations of the Trust. NOW THIS DEED WITNESSETH AS FOLLOWS: 1. The Trust shall be known as “Nature for Children Public Charitable Trust” (hereinafter referred to as the “Trust”). The registered office of the Trust shall be situated in .................... and shall for the present be at .................... (address). 2. For affecting the objects of the Trust, the Settlors hereby assign and transfer absolutely unto the Trust a sum of Rs. .................... (amount) (hereinafter referred to as the original corpus of the Trust). For effectuating the desires of the Settlors and in consideration of the premises, the Trustees agree and declare that they shall stand possessed of the original corpus of the Trust and such further sums of donations and subscriptions in cash or kind as may from time to time be received by the Trust and the income
with all the accumulations thereof and the additions and accretions thereto and the investment for the time being representing the same (all of which shall hereafter be referred to as the “Trust Fund”) upon trust and under the considerations, provisions and declarations concerning the same set out herein. 3. The objects and purposes of the Trust are as follows: (a) To ameliorate the living conditions of the poor and the needy and the physically handicapped in whatsoever manner and through whatsoever programmes or schemes as may be deemed fit by the Trustees. (b) Without prejudice to the generality of the aforesaid, the Trust may run orphanages, homes for the old and disabled, organise food camps for the poor, adopt poor families in villages and uplift their economic living standard; ameliorate the health conditions of the poor and needy or disabled and do all whatsoever is necessary, incidental or ancillary to the object of ameliorating the living conditions of the poor and needy and physically handicapped whether such activities are economical, education, social or cultural. (c) To establish and operate centres of education through schools, colleges, public libraries or vocational training centres or other centres for imparting formal or non-formal education. (d) To establish and operate centres for sports and physical activity. (e) To establish and operate centres for development of children by providing for activities, which stimulate the mental and physical growth of children. (f) To establish and operate centres for the care of animals and birds, such as hospitals, sanctuaries etc. (g) To establish and operate centres for the protection and growth of the natural fauna and flora of India from the viewpoint of protecting the ecology. (h) To establish and operate centres for promotion of art and culture of India. (i) To make such monetary and other donations and contributions as the Trustees deem fit to any organisation and/or programme engaged in any of the activities mentioned hereinabove: Provided, however, that the activities of the Trust do not involve the carrying on of any activity purely for profit. 4. The party of the FIRST PART shall be the first Chairman of the Board of Trustees (hereinafter referred to as the “Chairman”). In the event he is unwilling or unable to continue as the Chairman, he shall nominate one of the existing Trustees to be his successor in office. Thereafter, the Chairman of the Board of Trustees shall be appointed by a majority vote of the Board of Trustees. 5. The number of Trustees shall not exceed .................... persons and shall not be less than 3 (three) persons. The Trustees may, from time to time by majority vote, appoint such further and additional persons as Trustees as they may deem fit, provided, however, that the Chairman of the Trust may in his sole discretion veto the appointment of any further Trustees, in which event such persons will not
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be appointed as Trustees of the Trust. All such appointments shall be within the maximum number prescribed hereinabove. 6. The Trustees shall hold office as Trustees for life unless and until they are unwilling or unable to discharge their duties. Not withstanding the following, any Trustee may be removed from office by a majority vote of the remaining members of the Board of Trustees on the grounds of moral turpitude, or in the event the majority of the remaining Trustees feel that such Trustee is unable to carry on his duties as a Trustee. A Trustee shall continue to hold office until such time as his resignation is accepted by the Board of Trustees, and in the event he is discharged from his duties by the Board of Trustees, with effect from the date on which such decision to discharge is taken. 7. The Board of Trustees shall have the following rights and powers: (i) To manage the properties of the Trust and to solicit and receive and administer funds, received from any lawful source and to dispose of the same for any purpose of the Trust in any, lawful manner. (ii) To acquire by gift, purchase, exchange, lease or otherwise lands, buildings or other properties – movable or immovable, together with all rights appurtenant thereto. (iii) To contract, incur obligation and otherwise make legally binding agreements of whatever kind and purpose upon such terms and conditions as the Board of Trustees deem advisable. (iv) To receive monies, securities, instruments or other movable property for and on behalf of the Trust. (v) To raise funds for the Trust by gift, donations or otherwise. (vi) To invest the monies of the Trust upon such terms and conditions as the Board of Trustees deem fit and advisable. (vii) To sue and defend the legal proceedings on behalf of the Trust including compromise, settle or refer to arbitration all such proceedings. (viii) To make, sign and execute all such documents and instruments as may be necessary or proper for carrying on the management of the property or affairs of the Trust. (ix) To grant receipts, to sign and execute instruments and to endorse or discount cheques or other negotiable instruments through its accredited agents. (x) To do any other act or thing and exercise any other function or power permitted by law to the Trust which is incidental and conducive to the attainment of any of the aforesaid rights and duties and incidental or conducive to attainment of any other objectives of the Trust. 8. The Trustees shall, at all times, be empowered to accumulate the whole or any part of the income of the Trust for the purpose of achieving and/or furthering the object of the Trust set out hereinabove provided that such accumulation shall be in accordance with the requirement of the Income-Tax Act and the Rules made
thereunder from time to time. 9. The accounts of the Trust shall be maintained with such bank as the Board of Trustees may determine, and cheques on such account shall be drawn by any or all of the parties of the FIRST PART, the SECOND PART and the THIRD PART, and any such Trustee or Trustees as the Board of Trustees may decide upon. 10. The Board of Trustees shall cause to be kept true accounts relating to the said Trust and such accounts shall contain proper particulars of the money received and expended by the Board of Trustees and the matters in respect of which such receipts and expenditure take place as also such other particulars as may be usual in the account of a like nature. The books of accounts and other papers and documents relating to the said Trust shall be kept at the office of the Trust and shall be open to inspection by the Board of Trustees at all reasonable time. 11. The accounts of the Trust shall be audited every year by an auditor appointed by the Trustees for the purpose and shall be placed before the annual meeting of the Board of Trustees to be held within two months of any expiry of the official year of the said Trust. 12. Except in so far as may be otherwise provided, all decisions of the Board of Trustees shall be taken by a majority vote of the Trustees; in the event of a tie, the Chairman shall have the casting vote. 13. The quorum for any meeting of the Board of Trustees shall be two Trustees. All meetings shall be presided over by the Chairman. In the event the Chairman is unable to attend any meeting of the Board of Trustees, he shall nominate a presiding officer from amongst the Trustees to preside over the meeting. Such presiding officer shall have the casting vote in the event of a tie, but shall not be entitled to any other powers of the Chairman. 14. The Board of Trustees shall meet at least once every calendar year. A special meeting of the Board of Trustees may be summoned by requisition by any of the Trustee(s). The Board of Trustees may pass resolutions by circulation. 15. The Trustees shall be individually accountable only for such moneys, securities and other properties, as they shall actually receive, notwithstanding their signing any receipt. Each Trustee shall be answerable and accountable for his own acts, receipts, neglects or faults and not for those of the other Trustee(s), not for the insufficiency or deficiency of any funds, securities or other properties, nor for any other loss, unless the same is a consequence of any act and/or omission or any wilful default or negligence by the said Trustee. 16. Upon any sale by the Board of Trustees under the aforesaid power of sale, it shall be no concern of the Purchasor(s) dealing bonafide with the Board of Trustees to inquire as to whether the occasion for executing or exercising such power has arisen or whether the provisions as to the appointment or retirement of the Trustees contained herein have been properly and regularly observed and performed, nor shall it be any concern of the Purchasor(s) to see the application of the purchase money. 17. In the event of dissolution of the Trust, the assets of the Trust, after
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clearance of all debts and liabilities, shall be transferred to such organisation and/ or programme having object similar to that of the Trust, as the Board of Trustees may deem fit. No part of the properties and assets of the Trust shall be distributed amongst the Trustees. 18. The Trustees shall not be entitled to any monies or monetary compensation for services rendered by them in the discharge of their duties for the business of the Trust. 19. The funds of the Trust shall be invested and deposited in the forms and modes specified in sub-section (5) of section (13) of the Income-tax Act, 1961. 20. The Trust shall not spend its funds in any activities outside India without the prior approval of the Central Board of Direct Taxes. 21. The Board of Trustees shall have power from time to time to make such rules and regulations as may be necessary and as the Board of Trustees may think fit for the management and administration of the Trust, and also from time to time to set aside and vary any such rules and regulations provided, however, that no such rules and regulations shall in any manner be inconsistent with any of the provisions of this Trust Deed. 22. All questions of interpretation of the scope and ambit of any provisions of this Trust Deed shall be decided by the Board of Trustees, in the first instance by consensus, and failing that by a majority vote. No Trustee holding a minority opinion shall be entitled to raise any dispute regarding the interpretation of the Trust Deed in any form whatsoever. The interpretation of the majority shall also be binding upon the beneficiaries of the Trust. IN WITNESS HEREOF the parties hereto have set their hands hereunto respectively the day and year first here-in-above written. .................... A .................... B .................... C WITNESSES: 1. .................... 2. .................... ALTERATION OF A TRUST DEED MINUTES OF THE BOARD MEETING Minutes of the meeting of the Board of Trustees of Helping Hands Public Charitable Trust (the “Trust”), held on .................... day of .................... 20..... Present 1.
2. This was the first meeting of the Board of Trustees, which took place on ...................., when it was placed on record that the Trust was formed and functional on the .................... day of ...................., 20..... It was further placed on record that it was the intention of the Settlors to induct .................... (name) s/o Mr./Mrs./Ms. .................... (name), aged ...................., resident of.................... (address), as a Trustee, which was not possible on the date of creation of the Trust and registration of the Trust Deed with the SubRegistrar at ................., as he was out of the country at the time. It was unanimously agreed that .................... (name) be invited to be a Trustee of the Trust. It was further placed on record that the informed consent of .................... (name) to become a Trustee has already been obtained. Accordingly, .................... (name) has been appointed a Trustee of the Trust, as per the rules and regulation of the Trust for a period of .................... years (in perpetuity), subject to the terms and conditions, rules and regulation of the Trust. RESOLVED ACCORDINGLY Signed 1. 2. —————